I dont know the person who wrote this Forbes piece, but they could use a lesson in logic and reality!
The 4% rule also doesn’t take into account what you’d like to spend money on in retirement (like traveling, if possible) or what you’d need to (a new car) and when. Nor does it factor in rising health care costs and the possibility of long-term care costs.
Once again the 4% rule is being knocked. Fine, there is room for discussion; 3.5% – 5%, it’s a general guideline, but to say it doesn’t take into account buying a new car is ludicrous.
If you have $1,000,000 in retirement, the rule says take out $40,000 in the first year and that amount adjusted for inflation thereafter to not run out of money. That amount needs to cover ALL living expenses … travel, new car, whatever. If it’s not enough, it is because the $1,000,000 is not enough OR your basic spending is too high NOT BECAUSE the 4% rule flawed.
WHAT YOU WOULD LIKE TO SPEND on in retirement is determined by your income. If you have any amount and you withdraw much more than 4%, to support your desired spending, you risk running out of money. It’s just that simple.